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Amazon's Ambitious Bets Pile Up, and Its Losses Swell

Soulskill posted about 3 months ago | from the i-will-gladly-pay-you-tuesday-for-a-hamburger-with-2-day-shipping dept.

The Almighty Buck 168

New submitter shirleymarone sends word that investors are becoming impatient with Amazon's willingness to absorb short-term losses for theoretical long-term gains. The company brought in over $19 billion in revenue last quarter, but reported a net loss of $126 million. The company warned of even greater losses this quarter. Amazon officials exude a serene if vague confidence. "We're not trying to optimize for short-term profits," Thomas J. Szkutak, the chief financial officer, said in a conference call. "We're investing on behalf of customers and share owners," he said. "We're fortunate to have these opportunities." But even the analysts, who are generally enthusiastic about the company and its global ambitions, are asking slightly more pointed questions these days. For all these investments, one analyst asked Mr. Szkutak, why are sales not increasing even faster? His answer: Just wait. ... Amazon, which is based in Seattle, long ago transcended its roots as a simple retailer. In recent weeks it introduced Zocalo, a document storage and sharing service that grew out of its fast-growing web services division. It began a program to allow readers to consume as many e-books as they want for a set monthly fee. And it is starting to ship its long-awaited entry in the smartphone sweepstakes. The phone, the result of years of development by thousands of Amazon programmers and designers, is meeting some resistance from reviewers.

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surpising (5, Interesting)

LduN (3754243) | about 3 months ago | (#47530533)

Wow look at that... a company that (at least a little bit) cares about the customers at the end, not penny-pinching to make investors happy (for now).

Re:surpising (4, Insightful)

Anonymous Coward | about 3 months ago | (#47530645)

Wow look at that... a company that (at least a little bit) cares about the customers at the end, not penny-pinching to make greedy short-term investors happy (for now).

FTFY

Many of us investors do prefer to hold stock in companies that look like they're going to be around for a long, long time.

Re:surpising (0)

Anonymous Coward | about 3 months ago | (#47531171)

not sure why this is modded overrated... seems accurate to me.

Re: surpising (4, Insightful)

Karlt1 (231423) | about 3 months ago | (#47531343)

Amazon went public in 1997. How long do long term investors have to wait for consistent profitability?

Re: surpising (0)

Anonymous Coward | about 3 months ago | (#47531899)

Profits can be taxed. Most investors would rather have profitless growth than a dividend.

Re: surpising (5, Interesting)

Frobnicator (565869) | about 3 months ago | (#47531905)

How long do long term investors have to wait for consistent profitability?

Math time... $126M loss / $19B revenue = 0.66%, less than one percent loss for a quarter. The company is worth about $140B, so the quarter's drop is less than a tenth of a percent, meaning absorbing a the loss is a tiny decrease in a large bucket. In contrast, the skittish investors yesterday cost the company about $12B compared to the $126M business loss. The skittish investors who cause huge overnight drops like this create opportunities.

We're not talking about a company that is hemorrhaging money. It isn't a company plagued by mismanagement. It is a company that since their first day built a track record of tinkering with models. That is all Amazon has ever done. They have the resources to continue operating when they discover unprofitable ones. It takes money to make money, and many tests and changes cost time and money. Yes, some investors refuse to see the long term and demand a profit every single quarter. Other investors see this as an opportunity to buy or to hold.

Last night they took a 10% drop because short-term investors are skittish. Today you can buy it at a 10% discount; so thanks skittish investors!

Re: surpising (0)

Anonymous Coward | about 3 months ago | (#47532049)

the skittish investors yesterday cost the company about $12B

Let's be honest here, Amazon lost nothing yesterday. The only money that they got was from the IPO, and that has long been used. Short term investors that bought stock since Jan will have lost when they sell, but if you bought before August 2013, you'd would have made something even at today's prices.

Re: surpising (1)

Hussman32 (751772) | about 3 months ago | (#47532051)

Down four, buy more!

Re: surpising (1)

Kelbear (870538) | about 3 months ago | (#47532315)

Well here's a counterpoint view:
http://seekingalpha.com/articl... [seekingalpha.com]

It has a lot of charts and modeling that I don't understand, but at a high-level view, this analyst pins the lack of profitability to Amazon's revenues growing in less profitable business ventures while growing relatively slower in the more profitable business lines. In 2002, 78.8% of revenues were from Media, 19% EGM, and 2.2% Other. In 2014, it's 29.6% Media, 64.8% EGM, and 5.5% Other. Media has much bigger profit margins than EGM(electronics and general merchandise), and the company's weight has shifted heavily behind EGM. AWS has good profit margins, and will grow quickly as it's a relatively new and blossoming business arm, but it's unlikely to grow to the kind of size that would shift Amazon's sales mix away from EGM. Under this guy's reasoning, this means we can expect Amazon's profit margins to continue to bump along the bottom tied to the low margins on EGM, and can't foreseeably create the kind of high margins on EGM that would justify it's high share price, since it's an extremely price sensitive business. It makes this stock questionable in the long-term.

Nevertheless, I still bought shares today because it's a 10% discount off of one earnings report that doesn't show some kind of underlying catastrophe. They'll probably rebound to some degree within a year. And hey, I don't have that author's powers of analysis, but maybe Amazon's shotgun strategy of trying to find new ways to grow their business will find a winner (This latest phone isn't going to be it, but maybe something else will be).

Re: surpising (0)

Anonymous Coward | about 3 months ago | (#47532433)

I'll take that as a good sign. Over that same time we've watched media houses that were booming in 1997 when CDs were a big deal almost universally die off. It's also a company that was almost exclusively a media company. In 2002 it did less than $5B in revenue. It's diversified and aside form a few niche players (Apple) big growth tends to come in lower margins.

Re: surpising (0)

Anonymous Coward | about 3 months ago | (#47532413)

Non-sequitur. You write as if you have an expectation that long-term investment must have consistent short-term growth. Yet the very notion of long-term investment strongly hinges on companies which make daring moves to reach new markets, to avoid their extant market possibly drying up and the company going defunct, or even more established to have off-years in an otherwise consistent sell record in a niche market, as there are economic up turns and down turns that effect the spending habits of otherwise habitual spenders. Especially when it comes to Amazon, which has a long history (until 2009) of being unprofitable, there should be an expectation by long-term investors that profitability is a really long-term plan with plenty of unprofitable years along the way.

PS - One of the comments I made a long time ago was the notion that Amazon would fail precisely because investors wouldn't tolerate this consistent loss history and it seemed clear they just didn't know how to be profitable. In retrospect, I realize that the truth is there were much wiser investors who saw that Amazon in seeking to grow out had to spend more than even its revenue to become THE online retailer. Seeing as they've mostly, if not entirely, managed that--and their position has created a sort of monopoly which allows them very choice revenue from marketplace sellers who go through them--, it's little wonder that Amazon might be looking even further and trying to build an even larger empire. I have no idea if they'll succeed or not (or if it's a good investment), but I'm much quick today to discount what might be a very clear vision any more than I discount Google and its many costly projects even if most never pan out.

Re:surpising (0)

Anonymous Coward | about 3 months ago | (#47532003)

Short term? Amazon hasn't turned a profit in more than a decade. It's not being greedy or short-sighted to expect a return some time before the end of this century.

Re:surpising (5, Insightful)

wisnoskij (1206448) | about 3 months ago | (#47530651)

Umm... Well, to be clear. They are spending money to develop an iron grip on the industry in the long run. They are willing to lose money, not to be fair to customers, but to develope possibly the strongest monopoly that every has existed, and if left up to Amazon ever will exist.

Re:surpising (4, Insightful)

Raven42rac (448205) | about 3 months ago | (#47530839)

They've been doing this for close to 20 years, you think that would be plenty of time to actually make money.

Re:surpising (3, Insightful)

Charliemopps (1157495) | about 3 months ago | (#47530991)

They've been doing this for close to 20 years, you think that would be plenty of time to actually make money.

This is the internet... Hype = Profit

Re:surpising (4, Interesting)

MozeeToby (1163751) | about 3 months ago | (#47531361)

That's nice. Now for a thought. Let's imagine Amazon runs a script and raises all their prices, every single one of them, by 1% Would anyone notice? Would anyone care? Is 1% even enough to justify looking elsewhere for a product? They'd still be cheapest on 90% of things, why would anyone bother?

Guess what, they just boosted their profits by $700,000,000. Ok, lets say some people do shop elsewhere, so call it $600,000,000. Not just their revenues, their actual profits. And investors are running away

Re:surpising (2)

Alomex (148003) | about 3 months ago | (#47531969)

Let's imagine Amazon runs a script and raises all their prices, every single one of them, by 1% Would anyone notice? Would anyone care?

Yes, as every one with retailing experience can tell you it's a cutthroat business with profit margins in the 1-3% range, so a 1% change is huge.

Re:surpising (3, Insightful)

msauve (701917) | about 3 months ago | (#47531095)

They are making money, just not by selling goods and services - if you bought AMZN back in 1998, you'd have a greater than 6400% profit now.

No... (1)

Junta (36770) | about 3 months ago | (#47531471)

The investors might have made profit but the company itself is operating in the red. This just means the perceived value is higher than it was in 1998. Which makes sense, we are talking about a company that had 19 billion dollars flow through it in a quarter, which suggests a high likelihood they could be profitable at least for some time if they chose to.

Basically amazon has been saying they are investing and in the very long term the bets will pay off. AS it stands, amazon has not opted to proceed to '3) profit' and are firmly in the '2) ???' phase of their plan.

It remains to be seen how long their investments will pay off should they decide to back off. They have effectively been buying market share and for all the investors know, they have built no 'stickiness' and that share could evaporate the moment amazon decides it needs to be profitable and stops undercutting everyone else who needs to make a profit.

Re:surpising (2)

Salgat (1098063) | about 3 months ago | (#47531439)

You don't need a profit to benefit your investors. As long as your company grows in value, all those who own a share in the company see their own value also increase. Amazon is likely only around because of their long term strategy, which has afforded them the ability to remain relevant through fast shipping, large selection, and their media presence.

Re:surpising (0)

Anonymous Coward | about 3 months ago | (#47532395)

You don't need a profit to benefit your investors. As long as your company grows in value, all those who own a share in the company see their own value also increase. Amazon is likely only around because of their long term strategy, which has afforded them the ability to remain relevant through fast shipping, large selection, and their media presence.

You're begging the question - your concept of "grows in value" - by what means ought we to measure the value of a company?

At the end of the day the value of a company is the net present value of all future profits. It doesn't matter whether you distribute the earnings to investors in the form of dividends or reinvest it in your business (or other businesses) to make yet more money. But you do have to make money.

The stock price isn't the value of the company. The stock price is the opinion that other investors have about what your future profitability will be. AMZN is a much larger company than it was in 1997, and with near-monopoly power, could be very profitable, so investors are willing to gamble that Bezos might do so. If Bezos' actual strategy (to pull a completely ridiculous example out of my hat) is to spend 100 years gaining a monopoly on all Terran commerce and interplanetary trade, however, he will find very few investors willing to hold his stock, because most of them will be dead before they see a penny of return.

I'd rather own 1% of AMZN than 100% of some startup that failed. But if AMZN isnt' going to show a profit in my lifetime, I'd rather own 0.00001% of AOL or FB or TWTR or LNKD, or even garbage like GRPN or ZNGA or KING if I could get them at pre-Stage-1-funding prices, and dump it the day of the IPO, and lather, rinse, repeat that process every few years as each successive fad evaporates.

Re:surpising (1)

Sockatume (732728) | about 3 months ago | (#47531057)

I'm not sure that's true any more. One of the biggest businesses they were trying to compete, entertainment media, with has gone digital and despite their best efforts they're only remotely competitive in the books area. If their goal was to kill off retail stores and then dominate physical media delivery, it looks like they missed the boat by five years.

Re:surpising (2)

TheLink (130905) | about 3 months ago | (#47531181)

If it was Japan, China etc doing the same thing they'd be charged with "dumping": https://en.wikipedia.org/wiki/... [wikipedia.org]

Re:surpising (1)

afidel (530433) | about 3 months ago | (#47531331)

They're not selling goods below cost for the most part, it's just that their expenses eclipse their earnings from sales. This is largely due to capital investments in projects and shipping centers.

Re:surpising (0)

Anonymous Coward | about 3 months ago | (#47532461)

That sort of reasoning doesn't stop countries from being charged with anti-dumping stuff either.

Re:surpising (4, Insightful)

afidel (530433) | about 3 months ago | (#47531303)

Lol, they're less than 1.7% of the retail market, a quarter the size of Walmart and only twice the size of the flailing Sears. Heck, as a percentage of the market they're significantly smaller than the old Sears catalog business used to be.

Re:surpising (2)

trepanne (2648397) | about 3 months ago | (#47531377)

Yes, this.

AMZN's game plan is to transform retail by exploiting network effects, economies of scale, lower cost structure, and the ability to shunt costs off to others. They're investing heavily to create a dominating position that will be unassailable by new etrants - see Warren Buffett's comments about economic moats.

They are deliberately running their operations close to break-even from an accrual accounting point of view... their $126M loss sounds large, but it's not very material given their $20B of revenue over the same period. These losses (from low prices) are a crucial part of killing competition and transforming the retail ecosystem permanently. Instead they're focused on keeping enough positive cash flow that they generate enough internal funding to fuel their strategy without continuing to raise significant funding from sales of equity or debt. You need to focus on AMZN's statements of cash flow [sec.gov]

2014q2 operating cash flow was $862M - seven times the "swelling losses" making headlines. This didn't quite fund their purchases of property/plant/equipment which were $1,290M... but these kinds of cash sources & uses can be quite lumpy over the course of a single quarter; they maintain a very healthy warchest in corporate treasury as a shock absorber.

That's the game plan. Bezos is very good at it. The investors are on board... foregoing the bird in the hand to reap many more birds from the bush in the feature is what investing is all about.

I have no interest in owning the stock, but that's what those who do are looking at.

Re:surpising (2)

LordLimecat (1103839) | about 3 months ago | (#47531691)

How are they going to make the strongest monopoly ever? More stores than ever before are online now. I can literally order everything I need and have it shipped to me, and never touch amazon. Lowes, Giant Foods, clothing stores, Ali Baba, Ebay, all have online stores.

The barrier to entry is so absurdly low that I dont think anyone needs to worry about Amazon's monopoly, at least in the shopping sector.

And the barrier to entry for cloud services is pretty low too-- all you need is space at a datacenter (which can be had for relatively cheap) and you can offer a cloud platform.

Re: barrier to entry (1)

aap (108982) | about 3 months ago | (#47531831)

When you say the "barrier to entry is so absurdly low" you seem to mean that you could start a competing web site yourself for almost no money. And you could... but how will anyone find out you exist, and once they do, how will you convince them to buy from your site? Amazon has buying power, reputation, selection, and cheap fast delivery. They didn't get there overnight, and neither can you.

It's true that the other big names are not taking it lying down. More and more are offering shipping subscriptions, for example. But it's not so easy to convince someone to pay for multiple reduced shipping services from other sites once they have paid for Prime. You're right that there's little risk of actual monopoly though.

Re:surpising (5, Insightful)

Anonymous Coward | about 3 months ago | (#47530693)

Amazon will only seem to care about customers until they drive out all competitors. Then they will act like any other monopoly does.

Re:surpising (1, Funny)

Anonymous Coward | about 3 months ago | (#47530769)

If you think AMAZON is motivated to be "good to customers" I've got a drone-delivered DILDO for your ass!

surpising (5, Interesting)

slashdice (3722985) | about 3 months ago | (#47530773)

And the farmer cares about his pigs so he doesn't butcher them until they get nice and fat.

Re:surpising (3, Funny)

istartedi (132515) | about 3 months ago | (#47531697)

And the farmer cares about his pigs so he doesn't butcher them until they get nice and fat.

Honey, don't log on. That copy of To Serve Man just arrived. It's a cookbook!

Re:surpising (4, Interesting)

segedunum (883035) | about 3 months ago | (#47530925)

They don't care about customers. Not making a profit is a ruse that many companies pull to avoid tax and be creative with accounting.

Re:surpising (2)

bigpat (158134) | about 3 months ago | (#47531597)

They don't care about customers. Not making a profit is a ruse that many companies pull to avoid tax and be creative with accounting.

Bingo! I was looking to see if anyone else made this comment. As long as Amazon isn't just adding fat to the organization, but is actually reinvesting in growth which will otherwise be profitable, then not making a taxable profit is the best thing an American company could do with its money. Especially if they expect corporate tax relief in the future.

Re:surpising (1)

Ziggitz (2637281) | about 3 months ago | (#47531479)

Amazon is a company that realized if they just stuck with what they had ten years ago they wouldn't still exist today and they're not so stupid to think that doesn't hold true today.

This is how business should be done (1)

Anonymous Coward | about 3 months ago | (#47530543)

Short term profits are not everything, I am happy Amazon is willing to take the risk and spend the money for long term goals and gains. Wall Street needs to get over its obsession with quarterly reports.

Re:This is how business should be done (2)

FearTheDonut (2665569) | about 3 months ago | (#47530661)

Yes, I agree with this. But, at some point, investors need to get a return on their investment: it's what they asked for and it is required by law. The have never paid a dividend (as far as I can tell), and so their stock price is the only real way to get a return on the investment. At what point does "avoiding short-term profits for long term gains" become a losing bet? When does "long term" happen? That's what investors want to know.

Re:This is how business should be done (0)

Anonymous Coward | about 3 months ago | (#47530741)

It can be centuries if the board so agrees.

Re:This is how business should be done (2)

wisnoskij (1206448) | about 3 months ago | (#47530827)

Yes, and stock price is not cemented to profits.... Stock climbs as the influence of the company climbs. FB is a famous company that never made any profits, or even showed any ability to ever produce profits, that still had a tremendously good stock evolution. Or you could just look at Amazon's Stock Price [yahoo.com] , to see that it has been climbing and climbing and climbing, making their investors money (over the last 4 years alone it has gone up to 5 times its starting value).

Re:This is how business should be done (1)

Anonymous Coward | about 3 months ago | (#47530939)

But, at some point, investors need to get a return on their investment: it's what they asked for and it is required by law.

Nope. This is a gross (and on slashdot, quite common) misunderstanding of what rights shareholders actually have. You cannot sue (or at least, you cannot successfully sue) a company you own stock in simply because you think they aren't being run well. As long as the company is managed more or less in-line with what is described in their prospectus, there is no basis for a lawsuit: they were completely up front (in very general terms) about how they intend to run their business. You have no right to demand (eg) that they focus on short term growth unless the prospectus gives good cause for you to believe that they would.

Re:This is how business should be done (1)

Rhipf (525263) | about 3 months ago | (#47531163)

OK I'll admit I don't know much about business (or law) but is it really "required by law" for companies to give investors a return on their investments?

If this is actually true I guess I need to start investing some money.

Re:This is how business should be done (0)

Anonymous Coward | about 3 months ago | (#47532249)

No. People who like to pretend they dislike corporations say this as a way to justify their position.

Re:This is how business should be done (1)

sjames (1099) | about 3 months ago | (#47531521)

There is no such law. They are only required to make a best effort at a profitable company. Since nothing dictates the timeframe, they are free to play a long game so long as they can credibly claim that they genuinely BELIEVE that their actions will lead to long term profits.

Investors that were looking for a fast turnaround are free to look elsewhere. Investors that don't believe their plan will succeed are likewise welcome to move on.

Taken out of context (1, Funny)

Anonymous Coward | about 3 months ago | (#47530581)

"We're not trying to optimize for short-term profits," Thomas J. Szkutak, the chief financial officer, said

That's right, they are "capitalizing on long term losses" instead.

Taken in context (0)

Anonymous Coward | about 3 months ago | (#47531435)

Actually, they are capitalizing on short term losses, by plowing their money into capital improvements. This used to be how companies grew way back before Wall Street started demanding that they "grow" by firing all of the personnel to get a quick bump in profits this quarter so they could dump the stock and let the carcass rot.

Avoiding Amazon Web Services? (3, Interesting)

FearTheDonut (2665569) | about 3 months ago | (#47530633)

As a software engineer who is often asked to consider "the cloud," at what point should things like poor company performance impact software design decisions? It's easy to say not to use the cloud, but the cost savings for some make it irresistible. I suppose at some point AWS might go away due to a CEO change, corporate shift, etc., but I have a feeling that, with all of the consumer services using AWS, it will be considered "too big to fail," and be required to stay up (and, therefore, I won't have any reason to consider AMZN's performance as a software design concern.


Anyone have thoughts on this?

Re:Avoiding Amazon Web Services? (5, Funny)

FearTheDonut (2665569) | about 3 months ago | (#47530643)

Besides poor punctuation, missing end parenthesis, and way too many commas.

Re:Avoiding Amazon Web Services? (4, Insightful)

FearTheDonut (2665569) | about 3 months ago | (#47531101)

Great. I get marked a "Troll" for trolling my own post..

Re:Avoiding Amazon Web Services? (1)

netsavior (627338) | about 3 months ago | (#47531289)

Awesome. Made me laugh.

Re:Avoiding Amazon Web Services? (2)

netsavior (627338) | about 3 months ago | (#47530807)

In my opinion AWS is the most mature and the most flexible of the "big enough to matter" cloud providers. I don't foresee them stopping this service any time soon, but if they did, the chances that some other provider would provide a "turnkey" migration from AWZ to their service are very very good.

Not much will need to be changed if you use some other provider...

Just wrap the hell out of your S3 specific code for when thee next trend in "CEO Beat" magazine is "Self Hosting - How to cut your cloud budget to zero!"

Re:Avoiding Amazon Web Services? (1, Troll)

Guspaz (556486) | about 3 months ago | (#47531349)

You don't move to AWS if you care that much about budget; among cloud providers, they have some of the highest costs, and lowest performance. They're also one of the most flexible (in terms of what you can do), but there are a lot of mature cloud providers out there that will give you the same performance for a fraction the cost. Just not necessarily the breadth of services.

Re:Avoiding Amazon Web Services? (1)

Gr8Apes (679165) | about 3 months ago | (#47531933)

You don't move to AWS if you care about budget, uptime, control, security, nor ownership of your data and software.

* Budget - cheap to free to develop on, rapidly escalating costs for enterprise usage.
* uptime - AWS has had notable outages with relatively long recovery times. It's happened more than once.
* control - see uptime - you had no options when that happened.
* security - ultimately, you cannot control security if you don't have the hardware, or even software, under your control
* ownership - since you don't own the hardware nor software, all your data and software placed on the server is there for anyone with access to see. And there are people with access.

Re:Avoiding Amazon Web Services? (0)

Anonymous Coward | about 3 months ago | (#47530809)

In the same sense that Google Search might go away after a CEO change.

Re:Avoiding Amazon Web Services? (1)

swb (14022) | about 3 months ago | (#47531127)

One question might be "What business is Amazon in?"

They almost feel like one of those somewhat out of fashion companies that owns a whole bunch of businesses that are only tangentially related. Are they a consumer electronics company? A hard goods company? A clothing company (Zappos, and Amazon's fashion wing)? A bookseller? An internet services company?

With regard to the last one, maybe AWS isn't a long-term business but a medium-term strategy to sell their own excess capacity to cover the cost of having excess capacity in the near term and gain specific expertise in managing large, distributed computing environments almost 100% under their control.

At some point in a more mature Amazon business, does AWS go away because they no longer need to cover their own excess capacity? I'm guessing that AWS will be big enough business not to, but Amazon's kind of amorphous business model seems to add some uncertainty.

Re:Avoiding Amazon Web Services? (1)

Guspaz (556486) | about 3 months ago | (#47531335)

AWS is estimated to represent about $3 billion in revenue to Amazon, it's been a very long time since it had anything to do with Amazon's excess capacity.

Re:Avoiding Amazon Web Services? (2)

afidel (530433) | about 3 months ago | (#47531407)

AWS started as a way to gain revenue from the spare capacity they had for cyber monday, but it's now ~200x the size of Amazon's actual needs and is its own revenue and profit center. If a new CEO wanted to at this point he could spin it off into a separate company with contracts to host services for Amazon. I'm honestly not sure what it would gain you other than access to a pile of capital to use elsewhere, but for the time being Amazon doesn't seem to be hurting for access to capital.

Re:Avoiding Amazon Web Services? (3, Interesting)

mlts (1038732) | about 3 months ago | (#47531651)

I think AWS is the primary brand for cloud services, with Azure right on its heels, then other providers (Rackspace, etc.)

Amazon has some unique services that nobody else has. Glacier comes to mind for long term storage [1]. There are other services they provide which can be useful.

Amazon is not going anywhere... the shareholders may be unhappy right now... but it isn't like Amazon's market is drying up anytime soon. They are the only big company which can fight Wal-Mart and win on price alone. [2] If Amazon so chose, they could actually wage a battle on every front Apple is making money on, and actually make headway. Very few companies can do this.

Even if Amazon "failed", the cloud part would be spun off to a different entity. If not, because of all the critical data on AWS... Amazon almost certainly would receive a bailout, just like the car makers did.

[1]: Glacier is not going to replace a normal offsite volume anytime soon. The cost for uploading and storing is very reasonable. However, you do pay for accessing the data. If you use this for backups (I use it as the media of absolute last resort), it can be a useful tool.

[2]: This isn't a good thing with the race to the bottom, but a notable point.

We lose money on every sale... (1)

west (39918) | about 3 months ago | (#47530667)

"We lose money on every sale, but we make it up in volume" has never been as true as with Amazon.

(No, it's not literally true - but investors seem pleased to accept below-market returns (if not indeed losses) forever... If only the rest of American businesses had owners willing to give all their money to their customers.)

I'm doing my best to keep them afloat (1)

nani popoki (594111) | about 3 months ago | (#47530679)

I've bought over 1300 eBooks from their Kindle library. At $3 to $4 each... well, a Slashdot reader can certainly do the math.

Re:I'm doing my best to keep them afloat (1)

wisnoskij (1206448) | about 3 months ago | (#47530715)

Why?

Re:I'm doing my best to keep them afloat (5, Funny)

CrankyFool (680025) | about 3 months ago | (#47530795)

Probably because, we expect, that Slashdot readers are generally comfortable enough with elementary math to be able to either multiply $1300 by 3 ($3900) or 4 ($5200), or has easy access to a calculator.

Re:I'm doing my best to keep them afloat (0)

Anonymous Coward | about 3 months ago | (#47530927)

That "why" was probably more referring to the subject "doing best to keep them afloat" implying purposely going out of his way to make purchases on amazon while in reality probably saying that jokingly.

Re:I'm doing my best to keep them afloat (2)

wisnoskij (1206448) | about 3 months ago | (#47531053)

Actually it was referring to the reason behind purchasing 1300 ebooks.

Re:I'm doing my best to keep them afloat (0)

Anonymous Coward | about 3 months ago | (#47531781)

Why would anyone buy 1300 eBooks? To read them, obviously. DUH.

Re:I'm doing my best to keep them afloat (0)

Anonymous Coward | about 3 months ago | (#47532383)

Presumably it is because the OP likes to read.

Re:I'm doing my best to keep them afloat (2)

dohnut (189348) | about 3 months ago | (#47531241)

“I was in Nashville, Tennessee last year. After the show I went to a Waffle House. I'm not proud of it, I was hungry. And I'm alone, I'm eating and I'm reading a book, right? Waitress walks over to me: 'Hey, whatcha readin' for?' Isn't that the weirdest fuckin' question you've ever heard? Not what am I reading, but what am I reading FOR? Well, goddamnit, ya stumped me! Why do I read? Well . . . hmmm...I dunno...I guess I read for a lot of reasons and the main one is so I don't end up being a fuckin' waffle waitress.” -- Bill Hicks

But seriously, why? Why buy from Amazon or why buy at all (i.e. pirate)? Or is it why buy 1300 books? I know several people that can easily read an entire (200-300 page) book in just a few hours. One of them reads at least one book per day -- this is in addition to having a life. I'll never read 1300 books but they will have no problem doing it.

Re:I'm doing my best to keep them afloat (1)

WilyCoder (736280) | about 3 months ago | (#47531727)

...because the OP likes to read?

Re:I'm doing my best to keep them afloat (1)

KingOfBLASH (620432) | about 3 months ago | (#47531011)

I second that. I'm at 300+ books (although I have a tendency to buy professional reference materials that are $50+)

Kindle is awesome. Easy access to English language books (I live abroad, try finding the latest anything in Vietnam), it's searchable (great for reference books), and I own two kindles so I can keep an entire kindle of reference books in my desk without a huge footprint.

Re:I'm doing my best to keep them afloat (1)

nani popoki (594111) | about 3 months ago | (#47532209)

I do read a lot, mostly for entertainment. I'm averaging about three novels a week. I love that I can pack a dozen books for a trip without worrying about overweight luggage charges. At the price I'm paying per book, I'm now reading in more genres and reading more authors in the genre I always read a lot of. My model of Kindle doubles as an MP3 player, so I can have my tunes along as in-flight entertainment, too.

.7% (4, Insightful)

wisnoskij (1206448) | about 3 months ago | (#47530705)

That is not a loss, that is breaking even.

Yes, between the profits that they could be making, and them breaking even, they are "losing" money in some senses. But in terms of real world "losses" , they are not swelling or piling up, they are just spending their money as fast as it is coming in; And at the end of the year breaking even (within a percentage of a 1 percent).

Re:.7% (2)

west (39918) | about 3 months ago | (#47530977)

Given the opportunity cost of the money an investor spent on buying Amazon stock, it's pretty much effectively a loss.

Heaven help Amazon if its investors ever start demanding actual market returns. Luckily, it may never happen. By now, every investor has got to realize that Amazon's profits will never justify their stock price. Yell that the profits aren't high enough, and all you're doing is yelling that "the Emperor has no clothes", when you're invested in the Emperor.

Far better to praise Amazon's moves and sell it even higher to the next investor.

Re:.7% (1)

msauve (701917) | about 3 months ago | (#47531413)

AMZN in 1997 was $4. It's over $300 now. How is that "effectively a loss?" If you want to pick specific dates to make your point, I can do the same for some other company which makes real profits, and show a loss for investors.

Re:.7% (2)

macromorgan (2020426) | about 3 months ago | (#47531039)

Breaking even for them is more along the lines of a 7% profit. Anything below that is a loss. If Amazon makes 0.7% profit investing in itself or makes 7% investing in the market in general (like an S&P 500 index fund which averages year to year around 7%), 0.7% represents a loss of 6.3% not a profit of 0.7%.

Re:.7% (1)

theshowmecanuck (703852) | about 3 months ago | (#47531573)

This sounds more like you are describing Amazon shareholders making 6.3% less than what shareholders of other companies might make. That is not a loss to the company. You do understand that shareholders and the company are different entities don't you? You exhibit the warped logic that drives cowtowing to short sighted shareholders (I think calling them investors after this long in business might be disingenuous) who want immediate gratification and not to long term stable growth. If someone doesn't like it, they can sell their shares. That won't affect cash flow to the company, only a shareholder or share buyer. Maybe if we know if the profit/loss on the balance sheet includes payment to actual initial investment to venture capitalists... they are the ones who really need a set rate of return since at that point they ARE the company. But shareholders aren't, necessarily. I think that was the basis of the SCOTUS saying corporations are individuals. Sure if a block of shareholders large enough got together they could force short term returns to increase over long term stability and growth they can, and often do. Maybe this time we see the return of blue chip thinking. It is the kind of thinking needed to get North America back on the road to success in my opinion. Less drive to offshore for short term goals.

Re:.7% (1)

sjames (1099) | about 3 months ago | (#47532099)

In other words, it's fucked up market math. The same screwy math that claims adding $0.05 cost to a bill of materials will magically increase the retail price by $5.

0.7% profit may or may not be worthwhile, but it is not a loss. They can run forever on that.

Wally (-1)

Anonymous Coward | about 3 months ago | (#47530723)

Beaver

I will invest in that. (5, Insightful)

tekrat (242117) | about 3 months ago | (#47530733)

Any company willing to tell it's investors "screw you", because they are looking long-term instead of focusing only on quarterly gains, that's a company I'm willing to invest in.

It's a sad state of affairs in the USA that almost every public company, without question only looks as far as their next quarterly report, and no further down the road. This is why all these businesses are run by idiots that can't even tell you what their company even *does*, because they are so focused on manipulating the stock price and their personal bonuses.

One reason the Japanese kicked our asses in the 1980's is that they were looking at 10-year plans while the USA looked only to the next quarter. Now the Chinese are doing the same, with long-term strategies, and we continue to have not learned our lessons.

So, if Amazon is looking long-term, then they are better managed than 99% of USA businesses. That's a company I can believe in. And I'll invest in that.

Re:I will invest in that. (1)

Anonymous Coward | about 3 months ago | (#47530887)

I wish you'd screw that useless apostrophe. Look, it's means it is. Not difficult.

Re:I will invest in that. (1)

Salgat (1098063) | about 3 months ago | (#47531459)

He used it correctly in other parts of his statement. What likely happened is that he just had a typo and does know the correct meaning.

Re:I will invest in that. (1)

ERJ (600451) | about 3 months ago | (#47530905)

I don't disagree with your premise. Long term strategic planning is something that is very lacking these days. That being said, you can't just say "it will work out" which is kinda what Amazon seems to be doing. Retail is a hard game. Sure Amazon has other things brewing but their bread and butter is retail. Microsoft, Apple, IBM, Google, they can get away with doing heavy R&D and having some bad quarters but in retail you really kinda need to stay at least a bit profitable.

Re:I will invest in that. (3, Interesting)

Anonymous Coward | about 3 months ago | (#47530969)

Considering Amazon has had maybe 5 profitable quarters in 20 years, I'd say they most definitely aren't looking long term. Amazon is a skunk, always has been. People like you are just too fucking stupid to realize it and hand your money over to the clown Bezos.

I will invest in that. (1)

Anonymous Coward | about 3 months ago | (#47531019)

But amazon has been telling "screw you" to investors ever since it went public in 1998. How long is their long term plan? The only reason investors are tolerating this is because the stock price has gone up as apparently there is no shortage of people who think that huge profits are just around the corner.

Re:I will invest in that. (2)

bill_mcgonigle (4333) | about 3 months ago | (#47531247)

But amazon has been telling "screw you" to investors ever since it went public in 1998. How long is their long term plan? The only reason investors are tolerating this is because the stock price has gone up as apparently there is no shortage of people who think that huge profits are just around the corner.

It's not quite that simple - there are profits at Amazon - they are just in certain divisions that are then funding the money-losing divisions.

Amazon takes a profitable business (remember when they sold BOOKS?) and makes it profitable, but takes those profits to invest in something crazy (like NOT BOOKS, or Kindle, or Prime) and then those divisions get profitable and the cycle repeats.

If Amazon ever wanted to stop growing as a company it could kill off the non-profitable divisions and show a dividend in short order. This is why the stock has value. Perhaps too much, but the entire market is in a bubble, so it's hard to dice which part of the stock price is which. In some ways stock prices are relative with an absurd floor.

Investors who have no appetite for such companies can - :gasp: - invest in other companies.

Re:I will invest in that. (1)

LynnwoodRooster (966895) | about 3 months ago | (#47531041)

It's a sad state of affairs in the USA that almost every public company, without question only looks as far as their next quarterly report, and no further down the road. This is why all these businesses are run by idiots that can't even tell you what their company even *does*, because they are so focused on manipulating the stock price and their personal bonuses.

One reason the Japanese kicked our asses in the 1980's is that they were looking at 10-year plans while the USA looked only to the next quarter. Now the Chinese are doing the same, with long-term strategies, and we continue to have not learned our lessons.

I don't doubt that long-term strategy is important, but focusing exclusively on that is the sure road to ruin. For example, the Japanese were kicking our asses in the 1980s. How did that turn out? To win at business, you need to maximize your current position without harming your future growth. It's a tough line to walk, but you need both - or you either kill your future for the present, or simply cannot survive to the future.

Re:I will invest in that. (3, Interesting)

Sockatume (732728) | about 3 months ago | (#47531081)

Twenty years without turning a meaningful profit isn't a clever part of a long-term strategy, it's an entire ongoing business model. Even if Amazon wanted to turn the switch and start making money hand over fist somehow, it would take them decades to transform the kind of business they're in.

Amazon, as it exists now, will never be a wise investment.

Re:I will invest in that. (0)

Anonymous Coward | about 3 months ago | (#47531231)

+1.

Pretty much every single other company is all about how much monies did we make today? And if we didn't make monies today how can we gut the company to make monies tomorrow, and so on until the company is pretty much run into the ground or so "poor" that it just maages to eke for a while(possibly decades) along with no budget for R&D -> dies eventually.

Politicians are exactly the same, excepting that votes and brib... er campaign contributions.

Bullshit (2)

sociocapitalist (2471722) | about 3 months ago | (#47530763)

These almost certainly aren't real loses, just tax loses. The profits have all just been shifted offshore as the big multinationals do now.

Re:Bullshit (1)

hendrips (2722525) | about 3 months ago | (#47531531)

Probably not, actually - this loss is from their global operations, not just their U.S. business. Usually, multinational companies seek to minimize taxes by realizing profit in jurisdictions with low tax rates and costs in jurisdictions with high tax rates, but they usually do not actually under-report profits. CEOs and CFOs don't like jail very much, and tax fraud is one area of the law in the U.S. that's enforced nearly as zealously against the rich and famous as against normal people.

Oblig. xkcd (1)

barlevg (2111272) | about 3 months ago | (#47530777)

When I read the summary, I couldn't believe that Amazon had lost over six times its revenue. Then I saw that the revenue was in billions and the net loss was in millions. Fine, $19,000 million dollars looks awkward (despite what Randall Munroe thinks) [xkcd.com] , but there has to be a less confusing way to convey that information.

Re:Oblig. xkcd (1)

Lazere (2809091) | about 3 months ago | (#47530953)

Could just write the whole number out. "The company brought in over $19,000,000,000 in revenue last quarter, but reported a net loss of $126,000,000. Sure, it looks a bit weird at first, but it does have the bonus effect of giving people a sense of scale.

Linux is for fags (-1)

Anonymous Coward | about 3 months ago | (#47530783)

But... but... but.... it'z teh LINUXXXXXX!!!!!111!!!!! [thehackernews.com]

Amazon as infrastructure (1)

sugar and acid (88555) | about 3 months ago | (#47530889)

Amazon is all about market share and building infrastructure to support that market share. So actually the main driver of amazon isn't it's store front/web presence. They sell stuff online, so do thousands of other people out of there garages. What they are driving for in the warehouse/delivery infrastructure to deliver anything, anywhere fast and at the lowest cost. By doing that they can simply offer the same things, faster and cheaper than anyone else.

But that involves building warehouses in strategic locations, and forming deals with delivery companies that lower costs and streamline the process the whole way. At the moment, this extends to delivering to local delivery company and post office depots directly and relying on those delivery services for the last mile delivery.

They have taken that same physical strategic warehouse, tied closely to key last mile delivery infrastructure model into cloud computing. Which is essentially large warehouse of servers, strategically placed for maximum efficiency of running costs and internet connectivity to large markets.

What it means is that they spend all their money that they actually make on razor thing margins, building more infrastructure, to service more customers that they have gotten by out competing everyone on price and delivery speed. All Amazon has to do to turn a profit is to pull back a bit on the growth plans.

The latest foray is into grocerys in some large west coast markets. This is traditionally a direct from store/warehouse last mile delivery service, and offered by a large number of supermarkets etc theses days. What Amazon hope to do isn't to make a lot of money on it, but develop and support a last mile delivery service. Thus completing the vertical integration within amazon of the whole order, pick, pack, ship and delivery process.

 

Re:Amazon as infrastructure (1)

datavirtue (1104259) | about 3 months ago | (#47532199)

Even though Amazon has very good prices I find the most value in being a Prime member spending less time tracking down what I need. I don't have to drive...I don't have to find...I don't have to guess. The reviews are right there and the customer service is great. Click, shows up in 1.5 days...and I live in the deep countryside. Anything that removes my dependence on Wal-Mart's shitty retail and grocery management is a great thing.

"the more items Amazon sells to Prime members..." (1)

colfer (619105) | about 3 months ago | (#47530973)

"The more items Amazon sells to Prime members, the more money it loses." What bookshops have been saying for a decade is that Amazon is selling books at a loss, which used to be illegal as anti-competitive monopoly activity.

Much better than the opaque NYT article linked is this December article from IBT: "Amazon: Nearly 20 Years In Business And It Still Doesn't Make Money, But Investors Don't Seem To Care" http://www.ibtimes.com/amazon-... [ibtimes.com] It has the quote above, and the historic profit/loss graph I was looking for. Revenues have risen at a 45 degree angle, but profit/loss hovers around zero.

23% revenue growth! (5, Informative)

timeOday (582209) | about 3 months ago | (#47531051)

Amazon's revenue grew 23% over the same quarter last year. If the company were not growing AND not profiting, that would be bad. But as large as Amazon's revenues now are, to still be growing that fast is very impressive, and proves they could start taking profits at any moment simply by pocketing more revenue instead of re-investing.

Re:23% revenue growth! (0)

Anonymous Coward | about 3 months ago | (#47531355)

So they lose money but make it up in volume?

Re:23% revenue growth! (2)

Typical Slashdotter (2848579) | about 3 months ago | (#47531931)

...they could start taking profits at any moment simply by pocketing more revenue instead of re-investing.

Accounting tip: infrastructure investment doesn't show up in a profit and loss statement. It is only relevant for cash flow, and I don't think anyone accuses Amazon of managing cash poorly. Amazon isn't profitable because their sale prices are so close to the costs of the goods they sell. They can't stop any of these losses because they can't sell anything without first buying it from someone else. The only ways for them to increase profitability of their retail business are to raise prices (which they can maybe do) or to cut their costs for each item (which are probably pretty close to as low as possible already).

Conflicted (1)

HideyoshiJP (1392619) | about 3 months ago | (#47532269)

I have to admit that I don't care for the way they treat their employees, but I admire a company that values long-term profits over the short-term. I'm so conflicted now.

Why are they getting into the phone business? (1)

Radical Moderate (563286) | about 3 months ago | (#47532325)

Just seems like a bad move. Microsoft has been trying and failing to crack that market for a decade, Blackberry's been pushed out. This is not a market crying out for new players.
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